PRICING MODEL AND IMPLICATIONS FOR THE LUXURY RESIDENTIAL MARKET AND THE PRIVATE MASS RESIDENTIAL MARKET IN SINGAPORE

Abstract

This dissertation discovers the structural dynamics of Singapore’s luxury residential market, in terms of how the price behaviour of this market is influenced by the wider private mass residential market. Therefore, domestic and foreign investors would benefit from a unique price model in examining their residential investment decision-making, and to predict future prices. A corresponding real estate market analysis shows that the prices, occupancy and absorption rates of the overall private residential market, the luxury and the private mass residential markets are the highest in 2007. The overall private residential market is anticipated to experience a supply crunch in the short term. This dissertation develops a time series model through a first-order autoregressive error correction for the luxury residential market prices, covering 29 quarters from 3Q 2000 to 3Q 2007. Adopting ordinary-least-squares solution, the estimated model for the luxury residential price has a good fit. The overall private residential price is correctly and positively signed and it has the most significant explanatory effects for changes in the overall luxury residential prices, compared to the statistically significant vacancy rate of the luxury residential units in the current period, and the earnings of the high-end income. It is explicit from the model that the private mass residential market, the earnings of the high-end income group, prime lending rate, real GDP growth, new construction and the vacancy can explain the variation in the prices of the Singapore’s luxury residential market.